Association Serbia: Gaming Industry Market Report Jakta Association Research Team Research period for Serbia: 2 nd July 2 nd September 2012. Author: Mirjana Acimovic, Dejan Bozovic, Milica Dinic Report Date: September 11th, 2012 1
1. Basic Information The Republic of Serbia is a country located at the crossroads of Central and Southeast Europe, covering the southern part of the Pannonian Plain and the central part of the Balkans. Relative to its small size, history and culture, it is a very diverse country distinguished by a transitional character. Serbia is lanlocked and borders Hungary to the north; Romania and Bulgaria to the east; Macedonia to the south; and Croatia, Bosnia, and Montenegro to the west; also, it borders Albania. The capital of Serbia, Belgrade, is among the largest cities in east-central Europe. 2. Economy Serbia has a transitional economy mostly dominated by services, manufacturing and agriculture. The economy is heavily reliant on exports and foreign investment. Since 2000, Serbia has attracted over $25 billion USD in foreign direct investment (FDI). Although average GDP growth over ten years has been 4.45% per year, Serbia suffers from a high unemployment rate (23.7% as of February 2012) and an unfavorable trade deficit. [ Serbia is classed as an upper-middle income economy. GDP (PPP) for 2012 is estimated at $80.282 billion or $10,811 per capita (PPP). GDP per capita stood at 35% of the EU average in 2010. Serbia has free-trade agreements with the EFTA and CEFTA, a preferential trade regime with the European Union, a Generalized System of Preferences with the United States, and individual free-trade agreements with Russia, Belarus, Kazakhstan, and Turkey. 2
The major processed vegetable crops in Serbia are potatoes, tomatoes and pepper. Serbia grows about one-third of the world's raspberries and is a leading exporter of frozen fruit. In July 2010, the credit rating agency Dun & Bradstreet rated Serbia's economy at DB4d, which remained the same since the last rating. There was expressed concern for the slower-than-expected recovery of the economy from the global financial crisis, along with the continuous high business risk due lowered credit capabilities, increasing company bankruptcy and generally poor economic prospects. The Agency also expressed concern for the high credit debt and large number of foreign banks in the financial sector, creating an increased risk of instability. 3. Telecommunication 89% of households in Serbia have fixed telephone lines, and with over 9.60 million users the number of cell-phones surpasses the number of total population of Serbia itself by 30%. The largest cell phone provider is Telekom Serbia with 5.65 million subscribers, followed by Telenor with 3.1 million users and Vip mobile with just over 1 million. 52.1% of households have computers, 41.2% use the Internet, and around 45%- 50% (estimate) have cable TV, which puts the country ahead of certain member states of the EU. Serbia is ranked 57th in the world in terms of Internet usage out of 216 states. 55.9% of the population uses the internet, placing Serbia ahead of all Balkan countries. 3
Largest cities or towns of Serbia Rank City name Urban population 1 Belgrade 2 Novi Sad City of Belgrade South Bačka Municipal population 1,154,589 1,639,121 221,854 335,701 3 Niš Nišava 182,208 257,867 4 Kragujevac 5 Subotica 6 Zrenjanin 7 Pančevo 8 Čačak Šumadija North Bačka Central Banat South Banat Moravica 147,281 177,468 96,483 140,358 75,743 122,714 73,992 122,252 72,148 114,809 9 Kraljevo Raška 63,030 124,554 10 Smederevo Podunavlje 63,028 107,528 11 Novi Pazar Raška 60,638 92,766 12 Leskovac 13 Valjevo Jablanica Kolubara 59,610 143,962 58,184 90,301 14 Kruševac Rasina district 57,627 127,429 15 Vranje Pčinja 54,456 82,782 16 Šabac Mačva 52,822 115,347 17 Užice 18 Sombor 19 Požarevac Zlatibor West Bačka Braničevo 52,199 78,018 47,485 85,569 42,963 74,070 20 Pirot Pirot 38,432 57,911 4
4. General information on the Serbian Gaming Law and facts Types of Games of Chance 1. Classic games of chance; 2. Special games of chance; 3. Prize competitions in which prizes are awarded in goods and services. Classic Games of Chance 1. Basic classic games of chance: (1) Lottery, instant lottery, and other lottery-based games; (2) Sports betting (wagering on the result of football matches or other sports competitions); (3) Lotto, keno and similar games; (4) Tombola, bingo, and other similar games based on tombola; 2. Other classic games of chance: (1) Fonto; (2) SMS / Text message lottery; (3) Other games of chance (included in the games of chance catalogue) Right to Organize Classic Games of Chance The Serbian State Lottery has exclusive right to organize classic games of chance. Fee for organizing classic games of chance amounts to 60% of the basis which is the difference between the total value of stakes received and the total amount of winnings fund. 5
Special Games of Chance Special games of chance include: 1. Games organized in gaming facilities (casinos), in which players play against the casino or against each another on tables using: (1) Small balls; (2) Dice; (3) Cards; (4) Other similar accessories. 2. Games played on slot machines; 3. Betting, where the winnings and stakes are fixed at the moment of paying in the bet and which cannot be changed later, and where the participant bets on: (1) The results of individual or group sport matches and certain events relating to sports competitions; (2) other events Right to Organize Special Games of Chance The right to organize special games of chance in casinos is transferred with a license issued by the government. The right to organize special games of chance on slot machines and the right to organize betting on sport and other events shall be transferred with approval of the Administration. Approval Fee for games on slot machines Game organizers have to pay monthly fee for obtaining approval for organizing special games of chance on slot machines equal to 25 in dinar equivalent for each slot machine installed. 6
Organizing Fee for games on slot machines Game organizers has to pay 5% fee for organizing games of chance on slot machines, applied to a base equal to the difference between total funds collected as wagers and total payouts; however, the fee cannot be less than 35 in dinar equivalent per month, for each slot machine. If the organizer has annual turnover per slot machine in excess of 18,000 in dinar equivalent, he is obligated to pay 10% fee on the total annual turnover in excess of 18.000 in dinar equivalent. Approval Fee for betting Game organizers have to pay a fee for obtaining approval for organizing special games of chance betting equal to 100 per month, in dinar equivalent, for each betting shop. Organizing Fee for betting Game organizers has to pay 15% fee for organizing games of chance betting, applied to a base equal to the difference between total funds collected as wagers and total payouts; however, the fee cannot be less than the dinar equivalent of 500 per month, for each betting shop. Right to Organize Games of Chance through Means of Electronic Communications The right to organize games of chance through means of electronic communication can be transferred by the approval of the Administration. Only the Serbian State Lottery has the right to organize classic games of chance through means of electronic communication, without any specific approval. 7
Approval Fee through Means of Electronic Communications The organizer has to pay approval fee of total 2,500 per month in dinar equivalent for organizing any type of games of chance through electronic communication. Organizing Fee through Means of Electronic Communications The organizer has to pay monthly organizing fee for games of chance betting through electronic communication in the amount of 15% of the basis and for all other games of chance played through electronic communication in the amount of 5% of the basis which is the difference between total received stakes and total payouts, whereby the total amount of the monthly fee cannot be less than 7,500 in dinar equivalent. Prize Competitions in which Prizes are awarded in Goods and Services A prize competition in which prizes are awarded in goods and services is a game organized for promotional of other purposes by a legal person or an entrepreneur, and in which participants have a chance to win a prize in goods or services that are specified in advance. By purchasing certain products or using services or benefits provided by the organizer, a participant gains the right to participate in the game. Right to Organize Prize Competitions The right to organize prize competitions in goods or services is transferred by consent granted by the Administration. Organizing Fee for Prize Competitions Game organizers have to pay 25% of the total value of the prize fund as fee for organizing prize competitions. 8
5. Current facts on the gaming market in Serbia Organization of Classic Games of Chance Although the State Lottery has a monopoly on the classic game of chance, and the on-line games, in budget revenues from gambling it accounts for 42%. Organization of special games of chance in casinos a. There are two Casinos in Serbia, Grand Casino and Ja Casino. In budget revenues they accounts for 6%. b. There are 261 slot machines in two casinos Organizing by slot machine a. Slot Games are being organized in 25 cities of Serbia in 25 s b. There are a total of 65 companies with concession for organizing by slot machine c. There are a total of 51 companies with concession just for slot machine d. There are total of 14 companies with concession for slot machine and betting e. There is a total of 981 clubs operating only slot machines with 11545 slot machines f. There is a total of 931 clubs operating slot machines with betting g. There is total of 1912 clubs with slot machines h. There are a total of 19232 slot machines i. Average number of machines in clubs is 10 j. Average number of machines per district is 961 9
Organizing by betting a. Gambling games are being organized in 25 cities of Serbia in 25 s b. There are 21 companies that have concessions for betting c. There are only 7 companies that organize only betting in 520 betting places d. There are 14 companies with concession for slot machines and betting in 931 clubs with 7678 slot machines e. Total is 1451 betting places f. Average betting places in the districts is 72 g. Average slot machines per betting places with slot machines is 8 Organizing on-line games a. State Lottery with Sportingbet is organizing on-line games Budget revenues from games of chance (without State lottery) year 2011 1 dinars 2 Fee for games of chance in 293,844,485.21 2,799,852.16 casinos Fee for games of chance 1,359,642,732.76 13,955,147.52 on slot machines Fee for gambling - betting 1,087,299,158.46 10,360,163.49 Fee for organizing 92,747,707.24 883,732.32 competitions in goods and services Total fees 2,833,534,083.67 27,998,895.49 1 http://www.uis.gov.rs/istorijat.php?&lng=cyr 2 http://www.nbs.rs/internet/latinica/scripts/ondate.html 10
Comparison Chart of budget revenues by types of games in 2010 and 2011. Year 3 This chart shows that largest revenues comes from operation on slot machines and also indicates system mistakes regarding operation in casinos. Budget revenues from State Lottery 4 dinars 5 Fee for org. classic games 2.052,567,000.00 19,557,570.27 3 http://www.uis.gov.rs/istorijat.php?&lng=cyr# 4 http://www.lutrija.rs/sites/default/files/bilans%20stanja%202011.pdf 5 http://www.nbs.rs/internet/latinica/scripts/ondate.html 11
Budgets revenues from all Games of Chance Casinos 6% State Lottery 42% Private Sector/Slot macines&betting 52% Other facts 1. Total numbers of licenses for special games of chance on slot machines and betting is 3331 2. The total registered capital of companies that organize special games of chance is 108,378,137.00 3. The total value of issued bank guarantees for companies that organize special games of chance on slot machines is 5,769,600.00 -(300 per slot machine) 4. The total value of issued bank guarantees for companies that organize special games of chance betting is 4,353,000.00 (3000 per betting shop) 5. Total monthly approval fee for organizing on slot machines is 480,800.00 6. Total year approval fee for organizing on slot machines is 5,769,600.00 7. Total monthly approval fee for betting is 145,100.00 12
8. Total year approval fee for betting is 1,741,200.00 9. Total monthly organizing fee for games on slot machines is 673,120,00 10. Total year organizing fee for games on slot machines is 8,077,440.00 11. Total monthly organizing fee for betting is 725,500 12. Total year organizing fee for betting is 8,706,000.00 13. Total number of employees in 72 companies with licensee for special games of chance on slot machines and betting for 2011 is 6114 6, average 85 per company 14. Minimum of the monthly contribution for employees in 2011 7 was 18,817.00 dinars or 180 15. Minimum of the monthly contribution for employees in private gaming sector in 2011 was 1,096,209 for 6114 employees 16. The minimum wage for employees of 72 companies with license for special games of chance on slot machines and betting is 250, which is monthly amount of 1,528,500, per year 18,342,00.00 minimum. 17. There are 2403 premises in Serbia for organizing games on slot machines and betting. All this premises has minimum 1 night watchman and cleaner which are at least 4000 jobs. 18. Rent for this premises ranges from 150 to 15,000.00 19. Gaming organizers among other have to pay local utility fee, fee for construction land, taxes on business, taxes on commercial set, the fee for playing music, the fee for trash removal, administrative 6 http://pretraga2.apr.gov.rs/objedinjenepretrage/search/search 7 http://www.pravniportal.rs/index.php?id=2682&cat=257 13
fees for obtaining a license for organizing games of chance, the income tax and other. 20. Serbian Games of Chance Administration did not prepare rules which included technical standards, gaming laboratories for process of certification, on line system of control of operators, technical rules for on-line operating - which were due till May 2012. 21. Serbian Games of Chance Administration did not finished its own web site which was mention to enhance control of games and to provide transparency of legitimate gaming industry which was due by the January 2012 22. Serbian Games of Chance Administration on 10th of February 2012 the has sent a directive to all major ISPs, demanding them to block 70 blacklisted, unlicensed sites with only response from Telekom. 23. Without rules, there were no licensees issued for on-line gaming despite the huge interest. Monthly minimum for approving fee and fee for organizing for any type of games of chance through electronic communication is 10,000. Budget is missing minimum 700,000 monthly or 8,400,000 per year not being able to issue gaming license for on-line gaming for companies who are already operating in Serbia. - There is more 2000 web sites offering on-line gaming for Serbian citizens - There are more than 100 web sites in Serbia on Serbian language which provides direct direct passage to the online gaming sites, with advises why on-line gambling is better. One 14
of the explanations is - better quotes and games because operators are not paying taxes 8 - Great number of those Serbian web sites are advertising and having direct connection to pornography, escort services, which unfortunately is directly linking gambling with crime, prostitution, human trafficking 6. Market Overview 150 mil EUR estimated total turnover of registered operation 9 on slot machines. Market potential expected growth in future 500 mil EUR which can be reach with well regulation, on-line system of control, with introduction of laboratory, technical standards, reducing black market With such growth state could implement 15% tax on revenues just on one segment of games of chance, and have 70 mil EUR from taxes. 10 170 mil EUR estimated total turnover of registered operation 11 on betting. Market potential expected growth in future 500 mil EUR which can be reach with well regulation, on-line 8 http://www.tipovi.rs/kladjenje.php, http://www.rezultati.com/, http://www.livescore.rs/, http://www.fckladionica.com/bookies.php, http://www.online-kladionice.net/, http://www.netvodic.com/sport/kladjenje.htm#axzz25ijyguta 9 based on experiential data on average turnover of 600 per slot machine per month and analyse of Financial statements published in the Business Registration Agency 10 Macedonian example 11 based on analyse of Financial statements published in the Business Registration Agency 15
system of control, with introduction of laboratory, technical standards, reducing black market With such growth state could implement 15% tax on revenues just on one segment of games of chance, and have 70 mil EUR from taxes. Major players on Serbian Gaming Market first 10 Following companies are listed and sorted by number of the slot machines, registered capital and number of employees Nr. Name Number of slot machines Brand Registered capital (euro) Number of employees 1 Mozzart 2688 Mozzart 521,765.73 1880 2 Beo impera 1013 Balkan Bet 304,408.47 221 3 Ju-Krijkos 1000 Maxbet 523,997.77 82 4 Pionir Internacional 952 Balkan Bet 412,965.82 166 5 GIOIO 799 Alexandar 5,987,441.05 141 6 Joker games 790 Meridian 1,463,786.21 326 7 Ful 615 Brazil/Imperial 334,921.12 216 8 Atlantik Company 580 Atlantik 698,105.10 235 9 Admira 537 Admiral 3,342,801.53 142 10 Phuket 449 Soccer 300,000.00 148 16
Market share of first 10 companies Total number of slot machines on the market 20000 15000 10000 First 10 Companies All other 55 companies 5000 0 1 2 3 4 Series1 9423 9809 19232 The total number of slot machines, segmentation by Serbian s Nr. City Nr of slot clubs Nr. slot machines 1 City of Belgrade Beograd 571 7586 2 Mačva Sabac 40 242 3 Kolubara Valjevo 34 405 4 Podunavlje Smederevo 44 370 5 Braničevo Pozarevac 57 610 6 Šumadija Kragujevac 76 609 7 Pomoravlje Jagodina 63 495 8 Bor Bor 28 199 9 Zaječar Zajecar 23 176 10 Zlatibor Uzice 73 594 11 Moravica Cacak 52 426 12 Raška Kraljevo 59 568 13 Rasina district Krusevac 67 661 14 Nišava Nis 104 892 15 Toplica Prokuplje 15 105 16 Pirot Pirot 26 206 17 Jablanica Leskovac 30 342 18 Pčinja Vranje 60 507 19 Srem Sremska Mitrovica 92 840 20 North Banat Kikinda 26 198 21 South Banat Pancevo 57 381 22 Central Banat Zrenjanin 22 197 23 North Bačka Subotica 60 481 24 West Bačka Sombor 48 368 25 South Bačka Novi Sad 185 1774 Total: 1912 19232 17
Market coverage by presence in districts Nr. Company Number of s 1 Mozzart 25 2 Joker Games 23 3 Phuket 22 4 Apex 20 5 Ful 18 6 Ju-Krijkos 18 7 Soccer 18 8 Co.blg&D 17 9 Daytona 13 Slot machines - segmentation by Serbian s 368 481 1774 198 197 840 381 242 7586 370 610 405 199 594 609 495 426 176 568 661 892 105 342 206 507 18
Summary The analysis of data shows that there is trend of joining to merger of small and medium companies, especially regarding betting shops. This trend might be the response to enormous power and growth of three large betting companies lead by Mozzart. Companies Actual Game, Spinnaker, Phuket and Soccer are actually using two brands Spinnaker and Soccer and their owners are same people. Companies Premier, Aspekt, Daytona are also connected in some kind of joint venture operations with newly established Zero Bet. Zero Bet practically took over the business of Premier, Monako, Golden Goal with all their slot machines. Companies Beo-impera, Basket Trade, Pionir International are using same brand Balkan Bet and have same owners. Despite the losses suffered by the police raid in May 2012 they manage to remain most respectable betting shop among players. Companies Ju-Krijkos, Dan-Plus International one registered for slot machines, other for betting under MaxBet brand are also bouncing back and increasing their operation but now they exit gray and black zone. 19
Financial statements of the Agency for Business Registers Serbia reports significant profit of the following companies - Mozzart, Joker Games, Ju - Krijkos. Almost all other medium and big companies among first ten largest on the market reported operating loss. Large number of small companies in almost all districts is still operating in gray zone with old slot machines, garage manufactured in almost all districts. They have between 1 to 5 machines in small restaurants in villages and that kind of operation is almost impossible to control in current situation. More that 10.000 slot machines are estimated to be older those 10 years on Serbian gaming market. More than 7.000 slot machines are estimated to be manufactured in Serbia with copied Software. Great number of operators is still keeping parallel accounting. Black market is reduced, but it is still huge. Great number of operators is disadvanged by Financial Sector not being able to gain bank guarantee, or other financial service from banks just due to a fact that they are member of gaming industry. Foreign investment are still discouraged by many factors among one is slow and ineffective administration in Serbia, there is lack of 20
transparency in bringing regulation. Policy makers are sending mixed signals to interest parties aware that they still did not took full attention to games of chance. Big opportunity for all gaming industry representatives is that political situation is changing for the better and that they got their chance threw their association to equally participate in near future in the process of regulating and improving Serbian Gaming Market. Jakta in 2012 By the end of 2012 Jakta has 33 companies registered for gaming operation, technical support, manufacturing gaming equipment plus 9 associate members. Statistic overwiew: Date 16. October 2012 All Serbian Operators JAKTA memebers JAKTA % Total registered capital in 32,900,321.00 21,661,994.00 65.84 Number of employees 6129 1778 29.00 Number of gaming venues 2435 719 29.53 Numebr of slot machines 19332 4633 23.97 Number of gaming venues with beting 1451 283 19.50 Number of gaming operators 73 24 32.88 21
Jakta has become officially recognized as Serbian representative association in Gaming Sector. In 2012 Jakta organized two international conferences in order to bring the level of knowledge in gaming area and networking with colleagues in EU countries and ex-yugoslav countries, named: a) Games of Chance Control on 22 nd of May 2012 b) Latest EU action regarding Games of Chance on 22 nd October 2012 Both events were supported by Euromat which give Jakta great respectability. Jakta received Acknowledgement from Montenegro Government for supporting and developing gaming regulation and industry. Jakta participated in work for Serbian Government on National Risk Assessment for analysis of games of Chance Sector vulnerability with AML Department and also has received great input and information from Euromat Secretariat. Jakta received in written letters of support and recommendation from Ministry of Finances and Gaming Boards from Slovenia, Montenegro, Republika Srpska, Croatia, Federacy BiH and Latvia for commitment and contribution in gaming area in this part of world as well with support from various Serbian institutions. 22
Responsible Gaming In January 2013 Jakta presented Strategy for Responsible Gaming in the Republic of Serbia which is part of this report in Serbian language. 23